Portfolio Update - Ordinary Shares

RNS Number : 1285M

NB Distressed Debt Invest. Fd. Ltd

21 August 2013

 



NB Distressed Debt Investment Fund Limited

Portfolio Update- Ordinary Shares

NB Distressed Debt Investment Fund Limited ("NBDDIF") is a Guernsey-incorporated closed-ended investment company that launched in June 2010. NBDDIF's primary objective is to provide investors with attractive risk-adjusted returns through long-biased, opportunistic stressed, distressed and special situation credit-related investments while seeking to limit downside risk.

NBDDIF owns holdings diversified across distressed, stressed and special situations investments, with a focus on senior debt backed by hard assets. The portfolio is managed by the Distressed Debt team at Neuberger Berman, which sits within what we believe is one of the largest and most experienced credit teams in the industry.

On June 10th the Investment Period of the NBDD Ordinary Shares expired.  Following the expiry of the Investment Period, the net proceeds from the realisation of NBDDIF's investments will be distributed to Ordinary Shareholders in such times and amounts as determined by the Board of Directors. 

The Ordinary Shares are one of two classes of share in NBDDIF.  The other class is the Extended Life Share Class, offering exposure to new opportunities in this asset class after 10 June 2013.  The Extended Life Share Class is subject to an investment period ending on 31 March 2015.  A separate factsheet is produced for that class.

We were gratified to see the positive NAV movement achieved in the second quarter and year-to-date.  In the second quarter we exited three positions, which contributed to the increase in our NAV.  We continue to see significant upside potential in the existing portfolio, which we expect to realise as we exit investments.

Portfolio

As at 30 June 2013, 96.1% of NBDDIF Ordinary Share NAV ("NBDD NAV") was invested in distressed assets, with investments in 55 companies diversified across 17 industries.  NBDD's NAV per share increased 10.0% in the first six months of 2013, to $1.1837 from $1.0766 per share.  We believe our performance year-to-date compares favourably with other distressed debt managers, as indicated by the HFRI Distressed/Restructuring Index¹ which returned 6.9% in the first half of 2013 and Bloomberg's BAIF-Distressed Securities benchmark² which returned 6.7% over the same period.  In the second quarter, NAV per share increased 4.7%, primarily due to mark-to-market gains on positions which reached key restructuring milestones or made progress post-reorganization.  During the quarter, we saw our twelfth, thirteenth and fourteenth exits since inception, which are described in detail below.  We also added incrementally to existing names and initiated positions in shipping, aircraft, commercial real estate and other asset-intensive industries

Investment Exits

In the second quarter we had three exits, bringing our total to fourteen exits since inception.  The exits generated $1.2 million of total income and gains for the fund and included our most profitable exit to date (Investment Twelve) and our only negative exit in the life of NBDDIF (Investment Thirteen).

Investment Twelve: We purchased $5.4 million face value of a defaulted 1st lien term loan at 65% of par, secured primarily by television broadcasting assets, including licenses and programming. The company had filed for bankruptcy due to excessive debt incurred as part of a leveraged buyout.  We believed that our entry point represented a discounted valuation versus comparable companies and that obstacles to the restructuring process would be favorably resolved. The company subsequently emerged from bankruptcy and we received cash and post-reorganization equity securities, which we sold. Total income from this investment was $1.4 million.

Investment Thirteen: We purchased $2.8 million face value of a 1st lien term loan at 88.5% of par, secured by the production and transportation assets of a food products company. We had originally believed we would realize an attractive return on this position based on the strength of the collateral package. Due to high labour costs and declining demand for its products, the company filed for bankruptcy protection in early 2012. As the bankruptcy case developed and we became increasingly concerned about the dynamics of the restructuring process, we exited in the secondary market resulting in a total loss from this investment of ($0.5) million.

Investment Fourteen: We purchased $5.7 million face value of a 1st lien term loan at an average price of 36.6% of par, secured by the assets of a newspaper company focused on local markets in over 20 states in the U.S.  We believed that the loan price undervalued the company's assets and that in a sale of its newspapers and other media properties we would recover significantly more than our purchase price.  A proposed reorganization of the company's capital structure was not consistent with our original investment thesis and as a result we sold the position in the secondary market for 39% of par.  Total income from this investment was $0.2 million.

 Data as at 30 June 2013. Past performance is not indicative of future returns.

1.         The HFRI Distressed/Restructuring Index reflects distressed restructuring strategies which employ an investment process focused on corporate fixed income instruments, primarily on corporate credit instruments of companies trading at significant discounts to their value at issuance or obliged (par value) at maturity as a result of either formal bankruptcy proceeding or financial market perception of near term proceedings (provided by Hedge Fund Research, Inc.).

2.         The BAIF-Distressed Securities Hedge Funds Domiciled Globally Index is one of Bloomberg's Active Indices for Funds (BAIF) used to measure a fund's performance against its peers.  This index represents distressed securities hedge funds, domiciled globally.

-ENDS-

For further information please contact:

Neuberger Berman Europe Limited                               [phone]

Damian Holland

Anji Stewart

Financial Dynamics                                                            [phone]

Neil Doyle            

Ed Berry

Laura Ewart

An accompanying factsheet on the information provided above can be found on the Company's website www.nbddif.com. Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

END

 

 

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